Factsheet: No or low interest loans

If you are a low-income earner there are
alternatives to payday lenders and other fringe lenders or
brokers.

The No Interest Loans Scheme (NILS®) is
designed especially for people who are on welfare benefits who need
safe, fair and affordable access to credit.

Indira bought a new washing machine with a NILS®
loan

Indira couldn't afford a new washing machine when her old one
broke down. This meant she was doing all the family's washing in
the bathtub. When a friend at the neighbourhood centre told Indira
about NILS®, she went there to ask them about a loan.

She showed the NILS® Loans Worker her Centrelink pension card
and other documentation required for a loan application. The Loans
Worker helped her work out how much she could afford to repay. She
chose one of the washing machines available through the program and
it was delivered to her house. Indira is about to make her last
repayment on the loan and is very happy with her new washing
machine.

How do no or low-interest loans work?

NILS® is available in many places in
Australia. It offers loans of up to $1200 without interest charges
or fees to people on low incomes. The loans can be used for
essential household goods or services which improve the quality of
life for those who would otherwise not be able to access credit via
fair and equitable means.

You can use NILS® loans to:

buy essential household items, such as whitegoods, computers or
furniture

purchase health items such as wheelchairs or asthma pumps

pay for car repairs (but usually these loans are limited to
those in areas where there is little or no public transport).

NILS® providers are based in community centres and other local
organisations. To be eligible for NILS®, you must have a Centrelink
health care or pension card (or qualify for one) and show that you
have the willingness and capacity to repay the loan within 12 or 18
months.

Note: The NILS trademark is registered to Good Shepherd Youth
& Family Service (No 766836)

Other programs for low-income earners

StepUP

This program offers fixed-rate, low-interest, unsecured
personal loans for amounts between $800 and $3000, with no fees or
charges. The loans can be used for essential household goods,
second-hand cars, computers and medical and dental treatment.

This is a matched savings plan for people who have successfully
repaid their NILS® or StepUP loan. Once you have saved $300, the
bank will put in a dollar for every dollar you save, up to a total
of $500.

Please note that this program is currently being
reviewed by the National Australia Bank and Good Shepherd
Microfinance.
It will be temporarily unavailable from 30th April
2017.

Saver Plus

Saver Plus assists families on low incomes to develop a savings
habit, build assets and improve financial capability. Participants
set a savings goal and receive support and education to help them
achieve it. When they reach their goal, their savings are matched,
dollar for dollar, up to $500.

TIP: Don't borrow to pay bills

If you are having trouble paying a water, phone, gas or
electricity bill, contact your water, phone or energy company. Most
companies have hardship officers who can help you work out a plan
to pay the bill in instalments. If the provider
won't help you, you can complain to one of the following ombudsman
schemes.

Some charities provide vouchers to assist in paying electricity
debts. Contact your local community organisation to find out
more.

If you are eligible for Centrelink payments, you may be able to
get an advance payment. The amount available
varies depending on the type of payment you receive - for some
payments it is between $250 and $500, for other payments such as
pensions it can be between 1 and 3 week's worth of payment. You
have to pay this money back to Centrelink over the next six months,
but it may help cover a temporary shortfall and you won't pay
interest or fees (visit the Centerlink section of the Human
Services website).

Watch out for high-cost rental arrangements for whitegoods and
other essential household goods

If you don't have enough cash to pay for something upfront,
paying for it a little at a time through a rental arrangement might
seem like an attractive option. But those affordable weekly
instalments can quickly add up. That could mean that your new
fridge or computer ends up costing you more than you bargained
for.

The terms and conditions of these leases and contracts can be
complicated. For example, you may be charged account-keeping fees,
as well as penalties if you miss repayments, break the lease or pay
it off early.

TIP:

Six steps to smarter borrowing

Step 1.

Contact a local financial counsellor to see whether you can
budget to solve your financial difficulties without borrowing. Call
the National Debt Helpline on 1800 007 007 during business
hours.

Contact your local NILS® provider to work out if you are
eligible to apply for a NILS® loan (visit www.goodshepherdmicrofinance.org.au
for locations or call ASIC's Infoline on 1300 300 630).

Step 2.

Shop around for the best deal

Talk to NILS® before going to a payday lender or broker.

Ask the Department of Human Services if you can get any
financial assistance such as an advance payment (visit www.humanservices.gov.au).

Step 3.

Know who and what you're dealing with

Make sure you understand the conditions of your loan, what your
payment obligations are and what to do if you run into problems. If
you're not sure, ask.

Step 4.

Keep up with your repayments

Keep your repayments up-to-date.

Step 5.

Get help if you can't pay your debts

Act quickly if you are having trouble making
repayments. It may be difficult to face the problem, but ignoring
it will only make things worse.

If you can't make the full repayment, pay what you can. Contact
your credit provider without delay.

There are places you can go for help - MoneySmart has sample letters and
information about support services such as financial
counselling and legal assistance, call the National Debt Helpline
on 1800 007 007 or call ASIC's Infoline on 1300 300 630.

Step 6.

Complain if things go wrong

Try to resolve your problem with your credit provider
first.

If you aren't satisfied, take your complaint to the NILS®
Manager at Good Shepherd by calling (03) 9495 9600. If you wish to
make a complaint about the Saver Plus program, contact the National
Manager Saver Plus at the Brotherhood of St Laurence by calling
(03) 9483 1183.

Contact us

ASIC Infoline: 1300 300 630

Disclaimer

Please note that this is a summary giving you basic information
about a particular topic. It does not cover the whole of the
relevant law regarding that topic, and it is not a substitute for
professional advice.